Dear politicians, do something FAST about Britain’s crippling high VAT and rates
There is a storm brewing because of tax and business rate policies that cripple home-grown businesses — while barely touching sites like Airbnb and Bookings.com
WHILE the rest of us basked in this year’s long, golden summer, those providing our holiday fun have been under a heavy, black cloud.
Despite a boom in staycations and a record year for the number of tourists visiting from abroad, those in the leisure and hospitality industries are scared for the future.
There is a storm brewing because of tax and business rate policies that cripple home-grown businesses — while barely touching Silicon Valley behemoths like Airbnb and Bookings.com.
We all know how the high street has been hit because of how little tax digital rivals such as Amazon pay. Now the leisure industry is threatened — and with it a huge part of the UK’s economy and prosperity.
Airbnb is no longer a humble bed-and-breakfast operation. It is increasingly professionalised, competing directly with established hotels and guest houses which have to pay rates, corporation tax and keep to all sorts of regulations which don’t apply to the online competitors.
With little margin to cut prices, leisure, retail and hospitality businesses of all sizes are facing an increasingly uncertain future. This should be a matter of concern for everyone for a number of reasons — for our economy, for local investment and regeneration, and for jobs.
The industry proudly employs one in ten of the nation’s workforce and pays £40billion in tax every year, funding local and national services.
Never mind red Brexit buses emblazoned with signs about £350million a week being sent to the EU — that’s £750million this industry sends to the Government each week. The yearly total is the equivalent of the UK’s annual defence budget.
Alongside this, investment by businesses in the sector is estimated at £10billion a year, with the majority coming from the thousands of small and medium-sized firms that are the lifeblood of communities in every corner of the country.
As one of the largest employment sectors in the country, our industry gives many young people their first taste of work — from pulling pints and clearing glasses to washing plates, making beds and waiting tables.
We also give many people long and rewarding careers. But our politicians seem to take this for granted. Our contribution is not valued and our Government’s policies are not helping us. A major cause of this is business rates spiralling upwards.
Together, retailers and leisure operators make up ten per cent of UK business, but they pay 50 per cent of the rates bill. How is that in any way fair? At the very least, a new tax on digital operators is needed to help level the playing field.
Then there is VAT or sales tax. The UK is one of only three European countries to not reap the benefits of a reduced rate of VAT for tourism, and at 20 per cent has a rate almost double the European average. Ill-considered policy runs risk of youth unemployment
A cut to five per cent would generate a staggering £5.3billion in extra tax over ten years for Government because of the expansion it would create. Crucially, this expansion would also provide an additional 130,000 new jobs.
Most importantly, reducing tourism VAT would help to lower prices for consumers, making holidays and day trips more affordable to British families and more attractive to tourists from overseas. And those foreign tourists are huge money-makers.
This year is set to be a record year for visitors from abroad, with 40.9million trips here this year according to Visit Britain, up 4.4 per cent on last year.
Those coming will spend £26.3billion, up 7.1 per cent. More urgently, ahead of Brexit, we need to be able to invest in attracting, developing and retaining young British talent.
As more businesses are seeking to cut costs to meet these external challenges created by ill-considered policy, we run a real risk that any economic downturn will mean a return to significant youth unemployment.
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By doubling the national insurance threshold at which companies contribute to £12,000, it would free up funds to develop important skills for those starting out in their careers and enable employers to pay them more.
So it’s time for a coordinated, positive relationship between Government and the hospitality sector that backs jobs and growth. At the Conservative Party conference, the Prime Minister said she “backs businesses”, but up to now the criteria for “backing” seems to be selective.
The UK might be enjoying record visits, but basing an industrial strategy for tourism on the whims of currency fluctuations doesn’t seem sensible or sustainable. Hospitality in the UK needs a sector deal that allows it to compete fairly with both digital and Europe, and helps secure Britain as a great destination for all.
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